Bernanke Says He Didn't Bully BofA To Buy Merrill
Friday, Jun 26,2009, 10:05:25 AM Click:
Bernanke told a House committee investigating the matter that he did not threaten action against Bank of America's CEO Kenneth Lewis or the bank's board members if they decided to abandon the takeover.
"I did not tell Bank of America's management that the Federal Reserve would take action against the board or management" if they decided to invoke a clause in the acquisition contract in an attempt to stop the deal, Bernanke told the House Oversight and Government Reform Committee.
"Moreover, I did not instruct anyone to indicate to Bank of America that the Federal Reserve would take any particular action under those circumstances," he added.
Earlier this month, Lewis testified that his job was threatened after he expressed second thoughts about the deal. Lewis said then-Treasury Secretary Henry Paulson and federal regulators made clear that if Charlotte-North Carolina-based Bank of America Corp. reneged on its promise, that he and the bank's board members would be ousted.
Bernanke said no member of the Fed ever urged Bank of America to keep quiet about Merrill Lynch's financial problems. Not divulging that information would have violated Lewis' fiduciary duty to the bank's shareholders.
"Neither I nor any member of the Federal Reserve ever directed, instructed or advised Bank of America to withhold from public disclosure any information relating to Merrill Lynch, including its losses, compensation packages or bonuses or any other related matter," the Fed chief said.
It marked Bernanke's first public comments since the House committee launched an investigation earlier this year into whether he or other government officials bullied Bank of America to stick with its plan to combine the two financial powers after Lewis found out about Merrill's financial woes.
During the three-hour hearing, Bernanke faced often hostile questioning by lawmakers.
The committee's ranking Republican member, Rep. Darrell Issa of California, accused the Fed of having "deliberately kept other regulators in the dark regarding the negotiations with Bank of America."
That, he said, "raises troubling questions."
Rep. Jason Chaffetz, a Utah Republican, said of Bernanke's denial that he threatened Lewis' job: "With all due respect, I'm just not buying that."
In turning aggressive toward Bernanke, Republicans are adopting the role of outsider and trying to link the Fed chairman to the Obama administration as advocates of government meddling in private industry. Many Republicans are suspicious of the administration's plan to expand the Fed's regulatory powers.
It's an odd shift, because Bernanke is a Republican appointee and many of his key advocates are Democrats. His term expires early next year, giving President Barack Obama an opportunity to pick his own Fed chief or reappoint Bernanke.
Rep. Dennis Kucinich, a Democrat from Ohio, said he thought Lewis was the one pressuring the government.
He said the investigation revealed that Fed officials thought Bank of America failed to do proper due diligence when it came to Merrill Lynch.
When asked about Bank of America's management, Bernanke said: "I did have concerns, yes."
Bank of America received $45 billion from the government's financial bailout program, $20 billion of which was linked to its acquisition of New York-based Merrill Lynch.
Committee chairman Rep. Edolphus Towns, a New York Democrat, said that as part of the panel's continuing investigation, Paulson has agreed to appear before the committee in July.
Bernanke defended the deal and government bailout, saying the action was needed to avoid another blow to the financial system, which at the time was in distress.
If Bank of America had decided to abandon the deal, it "might have triggered a broader systemic crisis that could well have destabilized Bank of America as well as Merrill Lynch," Bernanke said.
Bernanke also said the Fed's lawyers believed it was "highly unlikely" that Bank of America would be successful in terminating the deal through the special clause.
The "best option," therefore, for the companies and the broader financial system was to work with the Fed and the Treasury Department to develop a contingency plan to ensure that Bank of America would remain stable should the completion of the acquisition and the announcement of losses lead to financial stress, he said.
The government helped orchestrate the deal at a time when the country's economic and financial landscape was especially fragile. Lending, the lifeblood of the economy, had come to a near halt and the financial system was on the brink of a meltdown.
The transaction was hammered out over the same weekend in September that another investment bank, Lehman Brothers, went under, leading to the biggest corporate bankruptcy in U.S. history and plunging financial markets worldwide into crisis.
One day later, the government was forced to bail out teetering insurance giant American International Group Inc.
You may also be interested in:
- Geithner Says AIG, Monoline Insurers 'Most Damaging Examples' in Derivatives Fallout
- Lenoir County arrest reports
- ECM solutions can benefit businesses, but lack of awareness
- Pennsylvania fi nally has a budget, but slashed programs leave few in the mood to celebrate.
- The Americans believe they are Savvy about insurance, but in
Hardy Underwriting Bermuda Limited has entered into an agreement with Arab
Copyright: PR Newswire Source: PR Newswire Wordcount: 975 Three-year
Bank holding company CVB Financial Corp (NASDAQ:CVBF) disclosed late Friday
Copyright 2009 San Jose Mercury NewsAll rights reserved San Jose Mercury News
INDIANAPOLIS_The Indiana State Teachers Association and the National Education
Gov. M. Jodi Rell is optimistic that the state Bond Commission will act swiftly
TALLAHASSEE - Florida moved a little closer to reducing its financial
- Most Read
- Most Discussed
- Most Emailed
- Class-action Suit Filed Against Nationwide Insurance
- Fiesta Insurance Plans 18 New Stores after Sales Growth
- Hartford Lawsuit Accuses Arch of Poaching Employees, Business
- Couple Charged With $38 Million Workers' Compensation Insura
- Florida Regulators Cite Liberty National Life Insurance In B
- BestWeek: Combined Ratio for P/C Writers Tips 100 Mark in Fi
- Allstate Asks N.J. for 15.4% Average Auto Rate Increase
- Towers Perrin, Watson Wyatt Merger Could Shake Up Employee Benefits Industry
- ‘Cash for Clunkers’ Requires Year of Continuous Auto Insurance Coverage on Trade-In
- Judge Upholds $13.1 Million Verdict in Lincoln Annuity Patent Case
- Mitsui Sumitomo To Offer Coverage Against Cloud Risk
- Obama usually Holbrooke served the board of AIG
- AnnuitySpecs.com Releases First Quarter, 2009 Indexed Sales
- Rate Moderation Is Slow But Steady
- Industry, following the attack Pirate of rate increases and
- BestWeek: NAIC Prepares for Budget Shortfall
- Florida to seek $1 billion in U.S. education grants
- Kingsway Financial Services Leads AMBG Tuesday that the cuts Global Insurance Index 0.80%